A swab was taken at a Covid-19 testing site in the Navajo Nation town of Monument Valley in Arizona on May 21. Arizona is among the states recently reporting sharp rises in coronavirus cases.
Photo: mark ralston/Agence France-Presse/Getty ImagesHospital operations are getting back to normal after months of upheaval. Health-care investors are betting big that things will stay that way.
Tenet Healthcare, which operates several dozen hospitals in the U.S., had good news for patients and shareholders alike on Tuesday: Admissions to the company’s hospitals in the first half of June reached 90% of levels before the coronavirus disrupted operations. Hospital surgery counts reached 95% of those precrisis levels.
That is great news for patients, and investors: Shares of hospital operators such as Tenet and HCA Healthcare have rallied sharply from their lows, while a broad index of medical device stocks has charged back to near record highs.
All that optimism will soon be put to the test, however: Covid-19 cases are rising sharply in highly populated states in the southern and western U.S. On Friday, Apple said it was closing 11 stores in Arizona, Florida and the Carolinas.
As a way to cope with a surge in cases back in March and April, hospitals around the country shut down elective surgeries to free up bed capacity. That resulted in a huge hit to the wider business of health care, which accounts for about one-sixth of U.S. gross domestic product. Tenet said surgery count fell 55% from a year earlier at the April nadir.
There is reason to believe this time may be different. Tenet said that Covid-19 patients in its hospitals, many of which are located in the Sunbelt region, are lately skewing younger than in the pandemic’s early days. “The length of stay on those cases is lower, the resource consumption is lower,” Chief Operating Officer Saumya Sutaria told Wall Street analysts Tuesday. Perhaps even more important, shortages of Covid-19 diagnostics and personal protective equipment have been remedied.
But the business of health care is in for a protracted recovery, even if things have returned to normal. A large backlog of patients in need of services has built up over the course of the spring, and filling it will take time, even if hospitals take extreme measures: Johnson & Johnson said in April it projected elective procedure capacity could expand by 30% nationwide if hospitals and surgery centers operated around the clock.
And while hospital capacity is still ample in states with rising case counts, investors aren’t being paid at all for the risk that may change. Even absent a formal shutdown, rising case counts and store closures could alter consumer behavior—a patient debating whether to get a knee replacement may choose to wait, for example.
For investors, taking some risk off the table might prove to be a sensible health decision.
Write to Charley Grant at charles.grant@wsj.com
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